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These guys have received $31 million in venture capital for their Bitcoin wallet business

If you ever meet Brian Armstrong, CEO of Coinbase, ask him to hook you up with some Bitcoin. “I’ll give $5 worth of Bitcoin to anyone who asks to help them get familiar with it,” he says, estimating that he’s given out at least 50 to 100 Bitcoin over the last year. When Armstrong left his engineering job at Airbnb in June 2012 to start a company that would allow people to buy and store Bitcoin, he gave a bunch of his colleagues one bitcoin each. They were worth $5 at the time. “I’ve been getting a lot of emails recently thanking me,” says Armstrong, as the price of Bitcoin went over $1,000 in December.

This week, though, Armstrong is the one being handed money. Coinbase announced a $25 million Series B round of funding, led by Andreessen Horowitz’s Chris Dixon. On top of a Series A from Union Square Ventures and Ribbit Capital, it makes Coinbase the most-well-funded start-up in Bitcoin, with a total of 31 million real world dollars sunk into it. “It was much easier to fundraise this time,” says Armstrong. “When we were going to meetings to get our Series A [at the beginning of the year], people had never heard of Bitcoin.”

“Right now Bitcoin is limited to a group of technology enthusiasts and early adopters,” says Chris Dixon of Andreessen Horowitz. “In the next one to five years, we want to see it brought into more mainstream use cases.”

The San Francisco-based company, founded by Armstrong and former Goldman Sachs trader Fred Ehrsam, offers over 16,000 merchants, such as OkCupid and Reddit, tools to accept Bitcoin for payment (like its competitor Bitpay), but it’s better known for being the easiest way to buy and sell Bitcoin in the U.S. It’s no longer public about how much Bitcoin is being bought and sold through its platform, but back in April, when it had one sixth of its current users and Bitcoin was a quarter of its current value, Coinbase processed $15 million worth of transactions, from which it takes a 1% cut.

It’s benefited from a dearth of competition in the U.S. in the last year when it comes to offering people an easy way to buy and store the increasingly popular digital currency. Japan-based Mt. Gox got raided by the feds for running an unlicensed money transmitter business in the U.S. Winklevoss-funded BitInstant has been down for months, after trouble with its bank accounts, tech problems, and a class-action lawsuit. Other companies offering ways to buy Bitcoins have also been dormant, complaining of banks that don’t want to deal with their accounts. Coinbase’s only real competition in the U.S. has been the option of meeting up with a Bitcoin holder and handing them cash. They’ve flourished as a result. When I visited Coinbase’s office back in May when I was living on Bitcoin, they had just 115,000 users. Half a year later, they have over 600,000. That’s likely a healthy percentage of the total number of Bitcoin holders in the U.S.

As to what they’ll do with their latest cash infusion, Armstrong says they plan to build out their team (they have just 8 full-time employees now); expand internationally to make their services available beyond the U.S.; and continue funding their ‘free money’ referral program. (Armstrong’s policy of giving away $5 worth of BTC is also a company policy for those who refer a friend.) The company also hopes to expand as a platform, developing apps and services for the Bitcoin ecosystem and making the transaction process smoother. Right now, it involves scanning QR codes with your smartphone’s camera or a long string of letters and numbers for a Bitcoin wallet.

Bitcoin has had its bumps this year. Banks have been hesitant to work with Bitcoin companies given the uncertainty about how it fits into the existing regulatory system and how it might be used for illicit activity. This week, a Redditor posted a letter from his “rinky dink” Pennsylvania bank, First Trust saying it had seen him transacting with Coinbase and asking him not to “perform transaction with this company or others like it.”

Ehrsam waived the letter off. “It’s a rarity. I was much more nervous about the regulatory landscape 7 months ago,” he says. The Senate hearings in November, where federal agencies expressed few concerns about Bitcoin, have eased those concerns. Ehrsam says Coinbase’s regulatory officer did call First Trust Bank to smooth the waters.

Given Bitcoin’s big run up in value, exchanges and wallets that host it are increasingly becoming targets for hackers. Millions of dollars worth of Bitcoin have been stolen in recent months. “Cold storage helps us sleep at night,” says Armstrong.

The company keeps 87% of its Bitcoin holdings stored in safety deposits boxes offline. They turn the digital money physical by printing the cryptographic keys necessary to move money and storing the print-outs “geographically distributed around the world,” says Armstrong.

I asked him whether the company advises customers with particularly big holdings regarding security. “We tell them to put the credentials for accessing their Bitcoin into their wills,” he says.

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I use Coinbase, they are pretty straightfoward. I also tend to recommend Coinbase to people who ask me how to buy bitcoins. They do not have the best exchange rate but if you have money in your bank account you can lock in the price at the current rate, which historically tends to go up. As opposed to sending your money to an exchange with a lower rate and waiting several days for it to clear before you can then trade at a higher rate.

Tails from the Darkweb where the value of Bitcoin has ignited cyber war.

Little is seen of what Bitcoin is used to buy. But the shutdowns of Darkweb online market places coincide with the overabundance and therefore falling price of Bitcoin. DDoS attacks against all TOR network market go on unabated. Every time an attack occurred that forced a shutdown the price of Bitcoin fell.

Don’t kid yourself Bitcoin is backed as much by drugs as it is by capital investors

I use Coinbase but their communication is sorely lacking. They don’t update their web site with issues so it results in large numbers of repetitive tech support requests. it takes days and days to get a response and sometimes they just cancel all the requests. The referral programs only pays when someone buys at least 1 BTC and the system doesn’t always work. I spent 2 months trying to contact them about their affiliate program problems and they never answered.

Coinbase cancels Bitcoin transactions after you have gone through their verification process and have withdrawn funds from your account. I purchased two Bitcoin for $696 each waited seven days to receive them, then was notified that my purchase had been canceled. It cost me $400 profit and the opportunity to move into Quarks. I am doubtful about that my money will be returned.

I read complaints on their site and their Facebook page that they were doing this. I didn’t think it would happen to me. I was wrong. They blame it on an algorithm. I may not get back my $1400. Others have the same complaint. Legal action may be necessary.

This warning is that Coinbase cancels transactions, holds your money, does not follow through on their representations and does this repeatedly and knowingly.

Coinbase gets your bank account info… make two small test deposits which you then verify… They have you wait for 4-7 days to receive your BCs. There is no risk of customers scamming them because they withhold finalization of the transaction so that they have the money before the transaction completes… for days. The only risk for them is that the price goes up.

I purchased two bcs 12/7 then transactions cleared my bank 12/10. They said I would receive the coins 12/15… five days later! WTF?! Remember, they make the representation that their customers will receive bc price paid. The customer relies on that. Cancellations are a pattern.

Here’s the legal def. of fraud: Fraud must be proved by showing that the defendant’s actions involved five separate elements: (1) a false statement of a material fact,[ You will recieve BC at the specified price.](2) knowledge on the part of the defendant that the statement is untrue, [The algorithm excuse, the repeated pattern].] (3) intent on the part of the defendant to deceive the alleged victim,[ They acknowledge the algorithm is catching up innocents and have not fixed it.] (4) justifiable reliance by the alleged victim on the statement, [The customer acts on the promise of BC at a certain price.] and (5) injury to the alleged victim as a result. [The customer is deprived of gain, as I was and may not get their money back.] But, even if they do…

The trend for digital currencies is gaining momentum around the world. More players are entering the DIGIDOUGH arena. Litecoin, XRP that Google has an interest of sorts in. That is a call for concern if you are a cold cash kind of person. However, More and more transactions occur electronically anyways. The dollar is backed by what? They print it all day, every day. The Federal Reserve owners have got to be going crazy. It is amazing that they believe they hold the exclusive rights to create any currency. Well we found a way around that. When I say we. I think many will agree that the balance of wealth is crazy. This is exactly what we needed in sharing power by complimenting the dollar. I for one am very happy. Keep your eyes and ears open for government interference and more importantly if any of the many billionaires get on board. Like I stated. The fact that Google is interested is very noteworthy. They however have been buying things like drunken sailors on shore leave. Just an expression. No offense to the men and women serving.